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Gold bugs are zeroing in on $1,370. And with good reason: That will be the critical level for the metal in this week's trading.

Gold showed tremendous strength late in the day on Tuesday and into New York's CMX floor close, pressing the market through new highs and reaching $1,348.70. The rally also coincided with a lower-than-expected yield in a two-year auction, which also provided support to the treasury market, and signaled a move toward safety.

Gold failed to make a new high in early Wednesday trading, as it matched that of last session on the reopen before trading more than $10 lower and finding support at $1,337.5. That's the second point of resistance, as we previously noted. With our new defined range between $1,300 and $1,370, our next resistance point of $1,351.40 has held so far. A failure to get above here on Wednesday would not be discouraging, but the bulls do not want to see new lows as the market consolidates.

There is major resistance at $1,370, which is in line with a retracement level and trend line. As Tuesday's pullback held our major support at $1,323 to $1,326.50, only a close below that will begin to signal a failure.

—Rich Ilczyszyn is founder and CEO of iiTrader. Follow him on Twitter @iiTrader.

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